SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 27,1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file no. 1-11056
ADVANCED PHOTONIX, INC.
Incorporated pursuant to the Laws of Delaware
IRS Employer Identification No. 33-0325826
1240 Avenida Acaso, Camarillo, CA 93012
(805) 987-0146
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
On August 4, 1999, 10,849,260 shares of Class A Common Stock, $.001 par value,
and 68,135 shares of Class B Common Stock, $.001 par value, were outstanding.
ADVANCED PHOTONIX, INC.
INDEX
PAGE
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) 3 - 6
Consolidated Statements of Operations
for the three month periods ended June 27, 1999
and June 28, 1998 3
Consolidated Balance Sheets
at June 27, 1999 and March 28, 1999 4 - 5
Consolidated Statements of Cash Flows
for the three month periods ended June 27, 1999
and June 28, 1998 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 8 - 10
PART II OTHER INFORMATION 10
SIGNATURES 10
2
ADVANCED PHOTONIX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three month period ended June 28, 1998 June 29, 1997
----------------------------------------------------------------------------
NET PRODUCT SALES $ 1,520,000 $ 1,958,000
COSTS AND EXPENSES
Cost of product sales 1,034,000 1,255,000
Research and development 163,000 90,000
Marketing and sales 253,000 250,000
General and administrative 249,000 270,000
---------------- ----------------
1,699,000 1,865,000
---------------- ----------------
PROFIT (LOSS) FROM OPERATIONS (179,000) 93,000
---------------- ----------------
OTHER INCOME
Interest income 26,000 28,000
Other, net (2,000) 1,000
---------------- ----------------
24,000 29,000
---------------- ----------------
NET INCOME (LOSS) - $ (155,000) $ 122,000
$(.01), $.01 per share ================ ================
See notes to consolidated financial statements.
3
ADVANCED PHOTONIX, INC.
CONSOLIDATED BALANCE SHEETS
June 27, 1999 March 29, 1999
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 310,000 $ 664,000
Short-term investments 2,062,000 1,867,000
Accounts receivable, less allowance
of $83,000 in June 1999 and March 1999 855,000 986,000
Inventories 1,635,000 1,551,000
Prepaid expenses and other current assets 97,000 88,000
--------------- ----------------
Total Current Assets 4,959,000 5,156,000
--------------- ----------------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS,
at cost 3,049,000 2,985,000
Less accumulated depreciation
and amortization (2,519,000) (2,474,000)
--------------- ----------------
530,000 511,000
OTHER ASSETS
Goodwill, net of accumulated amortization
of $261,000 in June 1999 and
$253,000 in March 1999 575,000 583,000
Patents, net of accumulated amortization
of $30,000 in June 1999 and
$28,000 in March 1999 50,000 52,000
Other 26,000 26,000
--------------- ----------------
651,000 661,000
--------------- ----------------
$ 6,140,000 $ 6,328,000
=============== ================
See notes to consolidated financial statements.
4
ADVANCED PHOTONIX, INC.
CONSOLIDATED BALANCE SHEETS
June 28, March 29,
1998 1998
- -------------------------------------------------------------------- ---------------- ---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 309,000 $ 263,000
Accrued expenses:
Salaries and employee benefits 274,000 310,000
Warranty 95,000 95,000
Other 90,000 133,000
---------------- ---------------
Total Current Liabilities 768,000 801,000
---------------- ---------------
COMMITMENTS AND CONTINGENICES
STOCKHOLDERS' EQUITY
Class A Common Stock, par value $.001 per share; authorized
50,000,000 shares;
June 27, 1999 - 10,849,260 shares issued and outstanding
March 28, 1999 - 10,849,260 shares issued and outstanding 11,000 11,000
Class B Common Stock, par value $.001 per share; authorized
4,420,113 shares;
June 27, 1999 - 68,135 shares issued and outstanding
March 28, 1999 - 68,135 shares issued and outstanding - -
Convertible Preferred Stock at redemption value; authorized
10,000,000 shares
June 27, 1999 - 80,000 shares issued and outstanding
March 28, 1999 - 80,000 shares issued and outstanding 64,000 64,000
Additional paid-in capital 22,704,000 22,704,000
Accumulated Deficit (17,407,000) (17,252,000)
---------------- ---------------
5,372,000 5,527,000
---------------- ---------------
$ 6,140,000 $ 6,328,000
================ ===============
<FN>
See notes to consolidated financial statements.
</FN>
5
ADVANCED PHOTONIX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
For the three month period ended June 27, 1999 June 28, 1998
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (155,000) $ 122,000
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation 45,000 89,000
Amortization 10,000 6,000
Changes in assets and liabilities:
Short-term investments (195,000) (1,092,000)
Accounts receivable 131,000 (15,000)
Inventories (84,000) 76,000
Prepaid expenses and other current assets (9,000) 17,000
Accounts payable and accrued expenses (33,000) (298,000)
------------- -------------
NET CASH USED IN OPERATING ACTIVITIES (290,000) (1,095,000)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (64,000) (32,000)
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (64,000) (32,000)
------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (354,000) (1,127,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 664,000 1,386,000
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 310,000 $ 259,000
============= =============
See notes to consolidated financial statements.
6
ADVANCED PHOTONIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 27, 1999
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) necessary for a fair presentation have been
included. Operating results for the three month period ended June 27, 1999, are
not necessarily indicative of the results that may be expected for the fiscal
year ending March 26, 2000. For further information, refer to the consolidated
financial statements and notes thereto included in the Advanced Photonix, Inc.
(together with its subsidiary, the "Company") Annual Report on Form 10-K for the
fiscal year ended March 28, 1999.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Net Income (Loss) Per Share: Net loss per share is based on the weighted average
number of common and common equivalent shares outstanding. Such weighted average
shares were approximately 10,917,000 at June 27, 1999 and 10,914,000 at June 28,
1998. Net income (loss) per share calculations are in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share" (SFAS
128). Accordingly, "basic" net income (loss) per share is computed by dividing
net income (loss) by the weighted average number of shares outstanding for the
year. "Diluted" net income (loss) per share has not been presented as the impact
is either not material or anti-dilutive.
Inventories: Inventories consist of the following:
June 27, 1999 March 28, 1999
--------------------- ---------------------
Raw materials $ 428,000 $ 453,000
Work in progress 1,041,000 926,000
Finished products 166,000 172,000
--------------------- ---------------------
$ 1,635,000 $ 1,551,000
===================== =====================
7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
- ---------------------
NET PRODUCT SALES
- -----------------
Net product sales for the first quarter of fiscal year 2000 ("Q1 00") were
$1,520,000, a decrease of $438,000 or 22% from revenues of $1,958,000 for the
first quarter of fiscal year 1999 ("Q1 99").
The decrease in net product sales was primarily due to lower volume in military
aerospace products which decreased by approximately 54% in Q1 00 compared to Q1
99. The Company completed deliveries on orders related to a large program during
the second half of fiscal 1999. Follow-on orders are expected and deliveries
should resume on this program during the later part of the current fiscal year.
During Q1 00, shipments of Large Area Avalanche Photodiode (LAAPD) products
(included in net product sales) were 21% higher than the same period in the
prior year. While sales from these products represented 9% of total net product
sales during Q1 00, the Company anticipates increasing volume from sales of
LAAPD products as markets begin to implement this "enabling" technology.
COSTS AND EXPENSES
- ------------------
Cost of product sales decreased by $221,000 in Q1 00 compared to Q1 99. The
decrease is primarily attributable to lower product shipments. Cost of product
sales as a percent of net product sales increased by 4 percentage points in Q1
00 compared to Q1 99 due to a number of factors including inefficiencies
associated with lower volume and lower margins stemming from variability in
product mix and engineering design revenues.
Research and development costs increased by $73,000 (81%) to $163,000 in Q1 00
as compared to Q1 99. The increase in R&D costs is primarily due to an increase
in internal R&D efforts as the Company focuses on improving its current line of
LAAPD products as well as expanding into new derivatives of the patented
technology. The Company is developing an Extreme Ultra Violet LAAPD capable of
detecting low light levels well below 200 nm. In addition, the Company continues
the development of a new generation two-dimensional LAAPD Array. R&D costs have
varied significantly in the past, and may continue to do so, due to the level of
activity associated with development contracts as well as the number and
complexity of new process and product development projects, the qualification of
new process developments and customer evaluation and acceptance of new products.
Marketing and sales expenses in Q1 00 were flat compared to Q1 99. The Company
believes its marketing and sales expenses will increase during the remainder of
the year as the Company pursues its plan of adding additional sales personnel,
increased trade show attendance and substantial print media advertising.
General and administrative expenses decreased by $21,000 (8%) to $249,000 in Q1
00 compared to Q1 99 primarily due to manpower cutbacks and efforts to reduce
costs.
Interest income in Q1 00 of $26,000 was $2,000 lower than Q1 99 as a result of
lower interest rates.
8
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At June 27, 1999, the Company had cash, cash equivalents and short-term
investments of $2.4 million, working capital of $4.2 million and an accumulated
deficit of $17.4 million. The Company's cash, cash equivalents and short-term
investments decreased by $159,000 during the three months ended June 27, 1999.
Cash of $95,000 was used for operating activities (before cash used for
short-term investments). Cash of $64,000 was used for capital equipment,
compared to $32,000 during the comparable period of the prior year.
To enable the Company to meet its capital commitment needs, the Company has
historically supplemented cash provided by operations with proceeds from private
and public sales of capital stock and borrowings. These funds have been used to
grow the core business and finance the development and initial commercialization
of the Company's LAAPD technology. While the Company believes that initial
commercialization has been completed and has reduced its expenditures for
research and development, it continues development of other derivatives of the
base technology. The continued development of LAAPD derivative products as well
as revenue growth in the business may require additional funds.
The Company has a revolving line of credit agreement with a bank for the lesser
of $1,000,000 or 75 percent of eligible trade accounts receivable, as defined by
the agreement. The agreement is in the process of renewal effective July 16,
1999, and provides for interest to be paid monthly at prime plus .5 percent. The
Company must adhere to certain requirements and provisions to be in compliance
with the terms of the agreement. Borrowings under the line of credit are secured
by accounts receivable, inventory, equipment and general intangibles. At June
27, 1999, no amounts were outstanding under any bank line of credit and there
were no stockholder loans to the Company.
The Company believes that the moderate rate of inflation over the past few years
has not had a significant impact on the Company's sales or operating results.
YEAR 2000 ISSUES
- ----------------
The Company is aware of the potential for Year 2000 software failures and the
associated impact on business operations. Software utilizing a two digit date
field may recognize a date using "00" as the year 1900 rather than the year 2000
(the "Year 2000 Issue"). The Year 2000 Issue could potentially result in a
system failure or in miscalculations causing disruptions of operations,
including among other things, a temporary inability to process transactions,
send invoices or engage in other similar normal business activities. The Company
developed a plan and identified Year 2000 Issues in certain software
applications and upgraded such applications with software that recognizes dates
beyond December 31, 1999, thus addressing a substantial portion of the Year 2000
Issue that may impact the Company (the Company is currently operating in its
fiscal 2000 and, therefore, has proven its reliability). The cost of this
project, as it relates to the Year 2000 Issue, did not have a material effect on
the operations of the Company. In addition, the Company made inquiries and took
inventory of its "mission critical" suppliers and manufacturing equipment. There
are alternative vendors and equipment available to meet the "mission critical"
needs of the Company in the event of unforeseen circumstances.
9
FORWARD LOOKING STATEMENTS
- --------------------------
The information contained herein includes forward looking statements that are
based on assumptions that management believes to be reasonable but are subject
to inherent uncertainties and risks including, but not limited to, unforeseen
technological obstacles which may prevent or slow the development and/or
manufacture of new products, limited (or slower than anticipated) customer
acceptance of new products which have been and are being developed by the
Company (particularly its LAAPD product line), the availability of other
competing technologies and a decline in the general demand for optoelectronic
products.
PART II. OTHER INFORMATION
Items 1. - 6. None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Advanced Photonix, Inc.
-----------------------
(Registrant)
Date: August 10, 1999 /s/ Patrick J. Holmes
--------------- ---------------------
Patrick J. Holmes
Executive Vice President, Chief Financial
Officer and Secretary/Treasurer
10